August 15, 2020

Inflation has already returned

Sir, I refer to your editorial “The economy is too weak for inflation to return” August 14, 2020.

No! The inflation has already returned, it is just not being measured yet. 

The CPI market basket is developed from detailed expenditure information provided by families and individuals on what they actually bought, and there is a time lag between the expenditure survey and its use in the CPI.

The consumption basket in a weak economy differs considerably from that of a strong economy. Ask anyone who on a tight budget has recently gone to the grocery store, and you can be sure he will complain about rampant inflation. 

PS. TIPS (Treasury Inflation-Protected Securities) are based on CPI while the Fed targets PCE. Does this have any implications?

PS. In these in real time information times, I am amazed there’s still a long time lag between the expenditure survey and its use in the CPI.
@PerKurowski